AUD/USD – Markets Await Australian Business Confidence, US Jobless Claims

The Australian dollar has posted slight losses on Wednesday, as AUD/USD trades at 0.7220 in the North American session. There are no Australian economic releases on the schedule. Over in the US, Crude Oil Inventories impressed with a reading of 8.0 million, crushing the estimate of 2.5 million. As well, FOMC member Jerome Powell will speak at an event in New York. Traders should keep a close eye on two key events on Thursday – Australian NAB Quarterly Business Confidence and US Unemployment Claims.

The RBA held rates at an even 2.00% earlier in October, and the minutes of that policy meeting shed some light on the central bank’s thinking. Policymakers noted that the economy had shown some improvement, crediting this to the lower value of the Australian dollar, which has boosted exports, as well as ultra-low interest rate levels. The minutes noted concern about the China economy, but said that despite this, there was no need to lower rates for some time. Interestingly, policymakers said that some players in the financial markets don’t expect the Federal Reserve to raise rates for the “foreseeable future”.

China has overtaken Japan as the world’s second largest economy, so when the Asian giant publishes data, the markets listen closely. Chinese GDP dipped to 6.9% in Q3, down from 7.0% in the past two quarters. Still, the markets preferred to view the cup as half full, noting that the forecast called for a gain of 6.8%. In an effort to spur growth, the Chinese central bank has cut interest rates five times since November an increased spending. The effect that China is having on the global economy and markets cannot be emphasized enough, and the Federal Reserve recently pointed at slower Chinese growth as a key factor in deciding not to raise US interest rates. Meanwhile, Chinese Industrial Production slipped to 5.7% in September, short of the estimate of 6.0%.

The lack of strong US numbers has reduced the likelihood of a rate hike by the Federal Reserve before the end of 2015. So where does the Fed stand? The Fed hasn’t cleared the air, as FOMC members continue to send out contradictory messages about the Fed’s plans regarding a rate hike. Still, an improvement in US numbers, especially employment and consumer indicators, could quickly revive speculation about a rate hike and boost the US dollar against its major rivals. This means that the upcoming US Unemployment Claims report will be carefully monitored, and an unexpected reading could have a sharp impact on the direction of the US dollar. The estimate stands at 266 thousand, higher than the previous report of 255 thousand.

AUD/USD Fundamentals

Wednesday (Oct. 21)

14:30 US Crude Oil Inventories. Estimate 3.5M

17:30 FOMC Member Jerome Powell Speaks

10:45 RBA Assistant Governor Malcolm Edey Speaks

Upcoming Releases

Thursday (Oct. 22)

12:30 US Unemployment Claims. Estimate 266K.

12:30 Australian NAB Quarterly Business Confidence.

*Key releases are highlighted in bold

*All release times are GMT

AUD/USD for Wednesday, October 21, 2015

USD/JPY October 21 at 16:05 GMT

USD/JPY 0.7222 H: 0.7276 L: 0.7202

AUD/USD Technical

S3

S2

S1

R1

R2

R3

0.7060

0.7100

0.7213

0.7440

0.7664

0.7770

0.7213 was tested late in the European session and remains under strong pressure.

0.7440 is a strong resistance line.

Current range: 0.7213 to 0.7440

Further levels in both directions:

Below: 0.7213, 0.7100, 0.7060 and 0.70

Above: 0.7440, 0.7664, 0.7770 and 0.7849

OANDA’s Open Positions Ratio

AUD/USD ratio is unchanged on Wednesday, as long positions continue to command a solid majority (54%), indicative of slight trader bias towards the Australian dollar moving to higher levels.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.

MarketPulse is a forex, commodities, and global indices analysis, and forex news site providing timely and accurate information on major economic trends, technical analysis, and worldwide events that impact different asset classes and investors.

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